COMPANIES NEED TO PREPARE FOR THE DAY AFTER TOMORROW – LEGAL DUE DILIGENCE IS A TOOL OF OPPORTUNITIES IN THE CRISIS
Edgard Carvalho -
Partner at Carvalho Magalhães Advogados, Postgraduate in Procedural Law from PUC Minas, MBA in Business Management from FGV/SP.
Business activity in Brazil already has a history of supporting the burdens arising from serious structural problems that impose high costs on companies of the most diverse sizes and sectors of the economy.
Allied to this, when faced with a situation of serious crisis that has a relevant macroeconomic impact, albeit transitory, such as the one that the world is going through, the lack of liquidity almost always generates, as an immediate result, the lack of cash to guarantee the continuity of activities.
In this scenario, obtaining credit becomes essential to equalize the lack of resources. However, it is necessary to see that, despite the crisis, there is a positive factor to consider in this scenario, because even in the face of financial difficulty, these companies may soon represent an attractive investment opportunity.
Even though the focus today is on how to get through the crisis that is taking place at an accelerated rate, it is a fact that the turbulence eventually passes. As a result, in the new scenario that will emerge, companies will need investments and investors will have an increasing appetite for diversifying their portfolios as a way of mitigating the significant losses recorded so far.
This is the scenario that the entrepreneur must see in the horizon in the medium term. While economic uncertainty plagues the global economy, this same context can be very favorable to investors and funds specialized in distressed investing.
While the crisis is far from reaching its peak, there are still no miraculous recipes on how to mitigate it, but it is possible to prepare the ground to take advantage of opportunities and ensure the attractiveness of the business at a time of economic recovery.
If, for now, there is no way to ward off the turbulence, legal due diligence in relevant areas of the company, such as tax, labor and civil obligations, is a relevant tool to overcome the crisis without making the business unfeasible, making it able to capture opportunities investment futures, because they will come.
In addition to ensuring compliance with internal procedures at this time, legal due diligence can help companies take advantage of the tax benefits being offered by the government, reduce tax liabilities, recover unduly paid taxes, renegotiate contracts, adjust labor issues, assess contingencies , review provisioning, re-analyze costs with lawsuits, seek alternatives to satisfy credit as a way to generate cash, among others. All this without representing a significant cost to the company, as it is a job that can be performed internally or by third parties who can link its cost to success by the benefits obtained.
While the world seeks to analyze the dimension of the crisis, companies can and should prepare for the day after tomorrow. It is time to organize ourselves internally, take advantage of present opportunities and be prepared for the investments that will come in the near future.
Jun 16, 2023 8:38:10 PM | entrepreneur
Business activity in Brazil already has a history of supporting the burdens arising from serious structural problems that impose high costs on companies of the most diverse sizes and sectors of the economy.
